Penny Stock Trading Is Back
The market could rally tomorrow as we head for overbought conditions.
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The Market
The beat goes on. It’s the 493 against the Mags. But let me point out a few things.
First, the uptrend line held on the QQQs (and the S&P). And the volume in the QQQs was almost 72 million shares, which on its own is no longer that big of a deal, but it is the highest volume since that mid-December low. That tells me we finally got some selling on Wednesday. You cannot get a clean out unless you get selling.
Then there is the 493 crew. As long time readers know, the Overbought/Oversold Oscillator I use is based on breadth not price. Breadth has been positive for eight of the last 10 trading days. If breadth is positive on Thursday, then we’ll be at nine out of 10 and that is what makes us overbought starting Friday.
If all of that wasn’t enough, Nasdaq’s volume was over 12 billion shares on Wednesday. We haven’t seen that since last fall. That’s because penny stock trading is back with the top two stocks accounting for nearly 3.5 billion shares of the total. I’ll call that another step toward giddy.
Oh sure, we are seeing tech stocks, especially the software names, get hit, but those are the index movers. Net volume on Nasdaq was actually positive on Wednesday, although I am forced to wonder if much of that was due to penny stocks. I do not like to rationalize it, net volume was positive.
That leaves us with a possible rally on Thursday, but I still expect to get more volatility, especially next week. Also, the 493 will be overbought by the end of this week.
New Ideas
We have had a terrific trade in Colgate (CL) over the last month or so. That little bottom measures to 86 to 87 and there is resistance at 86 (blue lines). I would not argue too loudly if you wanted to take some profits here, although my guess is dips get bought for the time being.
The question is if Visa (V) is worth a shot for a trade here. It is certainly getting oversold and is at support. If it can hang on for another day or so and doesn’t break 325-ish, then sure, a trade.
Today’s Indicator
The Volume Indicator, which got overbought a week ago has come back down to just over 51%. If we can get it back under 49% in the next week or so then that would be a plus.
Q&A/Reader’s Feedback
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Vertiv (VRT) looks trapped to me. I’m not sure it has the oomph to break out on the upside and if it falls toward that 150 support it probably bounced, at least the first trip down there.
I was asked if I still like Pfizer (PFE) and the answer is yes. With a base like that, how can I say no to this chart?! But it is frustrating. Yet I am sticking with it for now. If it cracks under 24 I might rethink my view.
I still can’t believe Moderna (MRNA) rallied so well because, as I have said every time I have liked it, it has managed to disappoint me. There is resistance in that 45 to 50 area and there is a measured target there. A gradual pullback toward 35 would be buyable because your stop would be rather close around 33.
If Trade Desk (TTD) can start holding and moving sideways, then I might just warm up to it. But I would need a better pattern to set up for me to think we can get more than a pop right now.
Did Disney (DIS) have a failed breakout or is my line not thick enough? I don’t know the answer yet but I do know I would love to see the chart come back into that 108 to 110 area, hold and then rally. That would give me some confidence that the chart should start working better.
At least Axon (AXON) met its downside target when it got into that 500 area. It’s possible it fills that gap overhead (700) but I’m inclined to think there is more work to be done before this can rally much better. I’m inclined to call it a hold here because it feels like it’s working on it.
I’ll give Intuitive Surgical (ISRG) a day or so to recapture that line around 550 to 560 but a failure to do that would have me thinking the stock is vulnerable to more downside (no target).
Astera Labs (ALAB) has my interest. As long as it stays over 150 I want to see if this chart can get going on the upside. It’s trying to saucer under, or feels that way to me.
Arm Holdings (ARM) has a measured target near that April low. I don’t think it gets there in a straight line. For example, in this 100 to 102 area, it fills that gap from April so should bounce from there. But if it then cannot get over 110 I think it would come down again. That’s the key.
It’s possible Strategy (MSTR) trades like I have drawn in but to be fair, there is a measured target much farther down that is unfulfilled so if it can’t map out like this, I’d get very concerned.
I would be willing to give Danaher (DHR) a chance to fill that gap at 245 as long as it stays over the uptrend line. There is a measured target in the 240 to 245 area so it’s getting to the point in time that it is overdue a correction.
